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Picture what Apple might do to media incumbents

As you’ve probably heard by now, Apple (Nasdaq: AAPL) is done. Sure it’s still the world’s most valuable company, but not by much after vaporizing more than $225 billion of paper wealth since the September top above $700 a share.

Also, the stock is down 10% today and the conventions of modern market commentary forbid discussing any company as a going concern while its shares are down double digits. I exaggerate ever so slightly of course. But there’s no exaggerating the extent of traders’ disappointment with Apple.

The downside of “falling short” by selling only $54.5 billion worth of stuff in three months is all the free advice from guys who couldn’t sell a cup of lemonade in the Sahara. That also happens to describe Ron Johnson’s track record at J.C. Penney (NYSE: JCP), which must be why Jeff Macke of Yahoo Finance is convinced that Apple should rehire its former retail chief ASAP.

But I don’t think that’s a radical enough fix—failure cannot merely be solved by hiring a failure. It must be reimagined, repackaged and redefined as a success, then blessed as such by a famous billionaire.

Take Netflix(NFLX), which is up more than 37% on the day after posting a surprise $8 million profit. Admittedly, its sales gain of 8% is slightly above the revenue increase Apple is forecasting in the current quarter. So while Netflix now trades at an earnings multiple of 98, Carl Icahn says he’s not selling any of his stake. And since he’s doubled that investment in four months, we know Icahn will be right always, on everything.

Perhaps Apple could interest Icahn in a stake. Sure it’s way too large to be effectively bullied by the old corporate greenmailer. But Icahn’s game is anyway more about pushing managers to do right by him rather than pushing them out. In any case, he’s the hottest name in the market genius sweepstakes today. And once he does sell Netflix, as he will, he should have plenty of spare cash to toss about.

Alternately, perhaps Tim Cook will note Amazon’s (AMZN) record high despite the fact that in its 19-year history that rival hasn’t come close to earning the $13.1 billion Apple took in last quarter.

I’m not saying Apple should buy Amazon, even though its cash stash is now large enough to do so at a 10% premium. Obviously, that would be the fastest way to destroy Amazon’s price-earnings multiple of 159. But perhaps that might come down some if Apple were to use some of its hoard to challenge Amazon with more aggressive discounts on content.

Less improbably, Apple could start leaking details about some of those cool products it’s allegedly got in its “chock-full” pipeline that no one outside the company has yet laid eyes on. I mean, Google (Nasdaq: GOOG) has driverless cars and Google glasses. Apple has a tease from a Steve Jobs biographer that the late icon solved the TV remote nightmare, a known interest in wearable computing, but nothing tangible that anyone could dream on.

But let’s get serious for a moment. One reason Apple hasn’t solved TV yet is because the gatekeepers--the cable and satellite companies with their installed base of millions of locked converter boxes—don’t want any such “solution.” They want to sell programming tiers and movies on demand, and Siri won’t be allowed to upend this captive market by letting consumers order the same flick from Netflix with a voice command.

So Apple should take a couple of the billions it’s got gathering dust and fund the development of a rival to HBO. Maybe bankroll some good movies and web series too, retaining distribution rights. And then use that content to disrupt the cozy media oligopoly that prefers to sell via expensive monthly subscriptions.

Investors want to know what comes next now that the current generation of gizmos pioneered by Apple is becoming commoditized. And while Apple surely has lots of hardware sales in its future, the content market is the one most vulnerable to the sort of wholesale disruption that propelled Apple to its riches in the first place.

The company need look no further than the record of its founder, who made a fortune by investing in a little known animation studio. Jobs ultimately sold Pixar to Walt Disney (NYSE: DIS), one of the incumbent media giants. But Apple should aim higher. It should build a homegrown media empire with the aim of disrupting the existing distribution model. There is a lot of money to be made from doing to Disney and Viacom (NYSE: VIA.B) what has been done to Dell (Nasdaq: DELL) and Palm. And Apple’s just the company to do it.